By Shereen Siewert
A report on North Central Health Care’s operations that led to the resignation of CEO Michael Loy shows the organization’s board locked in a power struggle with the county, with sharp disagreements over compensation for executive staff who were forced into a downgraded pay structure.
Wausau Pilot & Review obtained the report, which was compiled by outside law firm von Briesen & Roper, as part of an open records request sent in June.
In it, investigators show a tug-of-war between the Retained County Board Authority Committee, which was created in 2017, and the NCHC Executive Committee and Board, whose members became frustrated over the new committee’s far-reaching authority.
Executive Committee members questioned their very function when it became clear that the RCA could “now overrule anything the NCHC Board chose to do,” the report states. The friction was so intense that Loy and former NCHC Board Chair Jeff Zriny considered asking the Wisconsin Attorney General for an opinion on the subject but decided against it because “if you anger Marathon County in one area, it will cost you in another,” according to statements made by Zriny to investigators.
The biggest disagreements between the two groups centered on pay for NCHC’s executive staff, which came during a time in which the county was searching for a replacement for then-CEO Gary Bezucha, who retired in 2016.
When the recruitment for CEO began, a consultant recommended a salary range between $250,000 and $260,000 with the current market over $300,000, the report states. A 2016 CEO compensation study recommended a starting wage of $260,000 with a midpoint of $338,000. Their sources were a combination of mental health services, skilled nursing facilities, community services and human service positions.
The Executive Committee felt strongly that the CEO of NCHC should be paid at a level commensurate with a health care organization, while the RCA’s position was that the CEO of NCHC is a county department head. The Executive Committee insisted that NCHC operates as a business, not a county department which is all tax levy supported. Further, NCHC has revenue streams and bills for services; and now a Psychiatry Residency Program.
While the two committees were struggling to find common ground on a pay level for the CEO, something that had to be finalized before seeking candidates for the position, the RCA in August 2017 voted to downgrade the CEO and CFO at NCHC by two grade levels and the IT, HR, Human Services Operations and Nursing Home Operations executives by one grade level – and that each of the resulting grade compensation ranges be shifted down by 5%, according to meeting minutes. The group also voted to discontinue an employee incentive plan at NCHC – all over the objections of the NCHC Board.
Zriny, according to the report, was openly skeptical of the changes and expressed repeated concerns that the organization, already struggling to retain employees, was at substantial risk of losing staff, especially seasoned executives who took major pay cuts as a result of the RCA’s decision.
In pre-employment negotiations, NCHC drew up a draft agreement that also provided Loy a $300 per month travel stipend and a “retention loan” to repay student loans Loy incurred while completing his MBA, a requirement for the position. Those stipulations were ultimately removed from the agreement after the RCA determined that the compensation with those provisions would exceed the group’s prescribed salary maximum.
Loy responded by emailing both the RCA and NCHC boards asking for the provisions to be removed.
“In the face of all of this I am going to do what I believe is necessary to move this
organization forward and to avoid further being embroiled in any personal negotiation with all three County Boards over terms of my employment agreement,” Loy wrote. “Therefore, I am respectfully requesting the NCCSP Board Chairman in his authority to negotiate the employment agreement with me, to remove the student loan forgiveness benefit from my employment agreement along with any other considerations and restrictions associated with it. I believe in doing so, this would alleviate the heart and substance of the issue and perhaps we can move on.”
After Loy’s email, Zriny personally contacted Loy and expressed his anger at Marathon County leadership. “I am so angry,” he wrote in an email. “You’re doing just what they want. I’ll have to think about my strategy.”
Loy responded with, “I’m doing the right thing. We can put our arms down on this and move forward. We can move past this and start to sleep better.”
In late 2017, Loy, after spending 18 months as interim CEO, was formally appointed for the position with a salary of $168,850 – less than half the midpoint range recommended by the study and more than $60,000 less than Bezucha’s salary when he retired, county records show.
Benefit program launched, then questioned
Behind the scenes, efforts continued to find ways to offset the salary losses by executive staff and retain long-term employees. Sue Matis, former NCHC Senior Human Resources Officer, told investigators that she coordinated a new retention policy with the help of attorneys at Ruder Ware. That policy provided loans for key employees that were to be used to pay down student loan debt. The retention benefits, if earned, would be offset against the loan from NCHC and result in loan forgiveness.
In conversations with investigators, Matis said she had no reason to believe that Loy or Zriny did anything improper, nor did she recall Ruder Ware raising any concerns about the policy as written.
The new policy resulted in several loans to key personnel. NCHC CFO Brenda Glodowski, who took a pay cut of $36,000 under the revisions created by the RCA, was loaned $12,200, the report states. The loan was authorized by the NCHC Board. Zriny told investigators he did not recall whether they had to go back to the RCA for approval of implementing ways to attract and retain NCHC executives, but he believed such approval was not necessary.
Other loans soon followed. In August 2019, NCHC Information Technology Executive Tom Boutain was loaned $23,210.22. In January 2020, NCHC Chief Medical Officer, Dr. Robert Gouthro, was loaned $100,000, half of the retention loan being offered by another facility. And in April 2020, NCHC Operations Executive Jarret Nickel received a loan for $7,200. In each instance, the recipient had to show proof that the money was used to pay down student debt relevant to their occupations, according to county documents.
Around the same time, Loy began receiving a vehicle stipend of $500 per month, an amount approved by Zriny but not otherwise approved by the NCHC Executive Committee, Board or RCA. Zriny told investigators he believed he had the authority, as chair, to approve the stipend, which Loy did not personally request.
And on Aug. 26, 2020, Loy received a $60,000 loan, though his employment agreement did not reference retention bonuses. Zriny approved and authorized this bonus loan and told investigators he believed he had the power to do so in the best interests of NCHC.
“The loan was to make sure M. Loy ‘did not walk out on us,'” Zriny told investigators.
For Marathon County Administrator Lance Leonhard, the bonuses raised red flags. In a December 14 email, he expressed his dismay that the program wasn’t brought to the attention of member county boards in the Tri-County Agreement. Two days later, Loy himself requested a Marathon County Corporation Counsel review to certify NCHC’s policies and practices were appropriate. On Dec. 20, Zriny resigned as chair of the NCHC Board.
Investigators say Loy asked to repay the $60,000 loan. But the NCHC Board never acted on Loy’s request to willingly repay the benefit, and his vehicle stipend also continued.
In a statement, Loy said he believed he had “historic, precedential authority” to give the benefits, which include those given to several physicians not named in the report. Further, Loy said he based that belief on direction of the NCHC Board.
“I was never instructed that any policy required any further approval, which would have been atypical for employee benefit programs and policies at NCHC,” Loy wrote. “For physicians and executives other than me, I sought direction from legal counsel, the Board Chair, and the Executive Committee, and ultimately acted within the authority I believed I had.”
In his statement, Loy said the report “barely scratches the surface” on how this “complex matrix of governing bodies…wrestled over these issues, often poorly.” He also said he will “never understand” why the NCHC Board did not act on his request to willingly repay the employee retention benefit or why he continued to receive the stipend.
“The fact that I could not unilaterally undo these benefits only reinforces the fact that I could not have effectuated them for myself in the first place,” Loy said.
Both of those benefits have since been repaid by Loy, though to date no other employees have been asked to repay the loans they received.
Loy’s resignation was effective July 1. Marathon County paid Loy a lump sum of $25,000 as part of the separation agreement and paid the employee portion of his health and dental plans through July. He has since joined Geared Equity in Kronenwetter as managing director.
A formal statement from NCHC officials said the North Central Community Services Program Board remains “committed to the NCHC Mission and look forward to our future serving the residents of Marathon, Langlade and Lincoln Counties.”
“The NCCSP Board will commence discussions regarding the recruitment of a new CEO and discuss any potential amendments necessary to the Tri-County Agreement regarding CEO employment,” wrote Jessica Meadows, communications director for NCHC.
And NCCSP Board Chair, Kurt Gibbs, who is also chair of the Marathon County Board of Supervisors, said the group will move forward with “clarity” and “transparency.”
“NCHC’s partner counties remain committed to our shared Vision for NCHC and will continue working to ensure that NCHC continues to be an example to be followed at a State level,” Gibbs said.